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Testimony:
Before the Subcommittee on Energy and Water Development, Committee on
Appropriations, House of Representatives:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:00 p.m. EST:
Wednesday, March 4, 2009:
Department Of Energy:
Contract and Project Management Concerns at the National Nuclear
Security Administration and Office of Environmental Management:
Statement of Gene Aloise, Director:
Natural Resources and Environment:
GAO-09-406T:
GAO Highlights:
Highlights of GAO-09-406T, a testimony before the Subcommittee on
Energy and Water Development, Committee on Appropriations, House of
Representatives.
Why GAO Did This Study:
The Department of Energy (DOE) manages over 100 construction projects
with estimated costs over $90 billion and 97 nuclear waste cleanup
projects with estimated costs over $230 billion. DOE has about 14,000
employees to oversee the work of more than 93,000 contractor employees.
Due to DOE’s history of inadequate oversight and management of
contractors, GAO continues to include DOE contract and project
management on its list of government programs at high risk for fraud,
waste, abuse, and mismanagement. This testimony discusses (1) recent
GAO work on contract and project management within two of DOE’s largest
program offices—the National Nuclear Security Administration (NNSA) and
the Office of Environmental Management (EM), (2) preliminary results of
ongoing GAO work on project management at NNSA’s Mixed Oxide Fuel
Fabrication Facility (MFFF) project at the Savannah River Site in South
Carolina, and (3) actions needed by NNSA and EM to improve contract and
project management.
GAO’s reports over the past 3 years have contained nearly 60
recommendations collectively calling for DOE to ensure that project
management requirements are consistently followed, to improve oversight
of contractors, and to strengthen accountability. While DOE has
generally agreed with these recommendations and some actions have been
taken, the majority are still open and awaiting action by DOE.
What GAO Found:
Since 2006, GAO has issued 12 reports examining DOE’s contract and
project management. Two of these reports examined the performance of
DOE’s largest construction projects—nearly all of which are managed by
NNSA or EM—and EM’s largest nuclear waste cleanup projects. These
reports documented that the cost increases and schedule delays that
have occurred for most of these projects have been the result of
inconsistent application of project management tools and techniques on
the part of both DOE and its contractors. Specifically, GAO reported in
March 2007 that 8 of the 10 major NNSA and EM construction projects
that GAO reviewed had exceeded the initial cost estimates for
completing these projects—in total, DOE added nearly $14 billion to
these initial estimates. GAO also reported that 9 of the 10 major
construction projects were behind schedule—in total, DOE added more
than 45 years to the initial schedule estimates. In particular, the
Waste Treatment Plant project at the Hanford Site had exceeded its
original cost estimate by almost $8 billion and experienced schedule
delays of over 8 years. GAO also reported in September 2008 that 9 of
the 10 major EM cleanup projects GAO reviewed had experienced cost
increases and schedule delays—in total, DOE estimated that it needed an
additional $25 billion to $42 billion to complete these cleanup
projects over the initial cost estimates and an additional 68 to 111
more years than initially estimated. In addition, GAO has issued a
number of other reports over the past 3 years on specific projects
which found similar management problems with NNSA and EM.
Preliminary results from GAO’s ongoing review of NNSA’s MFFF project
indicate project management concerns continue. The facility, which is
designed to convert 34 metric tons of surplus weapons-grade plutonium
into fuel for use in commercial nuclear reactors, is estimated to cost
about $4.8 billion and begin operations in 2016. One of the key
management systems NNSA uses to measure and report on the project’s
progress—the project’s earned value management system—depends on a
reliable schedule that specifies, for example, when the project’s work
activities will occur, how long they will take, and how they relate to
one another. GAO has previously identified nine key practices necessary
for developing a reliable schedule. However, the project’s schedule, in
addition to other problems, does not adhere to a key practice that is
fundamental to having a sufficiently reliable schedule—specifically,
MFFF project staff have not conducted a risk analysis on their current
schedule using statistical techniques. DOE officials responded that
they plan on conducting a risk analysis of the schedule for the MFFF
project during the summer of 2009. Consequently, NNSA cannot adequately
state its level of confidence in meeting the MFFF project’s completion
date, and NNSA’s schedule for the project therefore may not be
reliable. GAO’s work on this project is continuing, and GAO intends to
work with NNSA to resolve these issues.
View [hyperlink, http://www.gao.gov/products/GAO-09-406T] or key
components. For more information, contact Gene Aloise at (202) 512-3841
or aloisee@gao.gov.
[End of section]
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss GAO's work on contract and
project management at the Department of Energy (DOE). As you are aware,
we issue a high-risk status report at the start of each new Congress to
help in setting congressional oversight agendas and to promote a more
effective, credible, and results-oriented government. GAO designated
DOE's contract management as a high-risk area in 1990--the first year
the high-risk list was published. DOE, the largest civilian contracting
agency in the federal government, relies primarily on contractors to
carry out its diverse missions and operate its laboratories and other
facilities--about 90 percent of its annual budget is spent on
contracts. DOE has about 14,000 employees to oversee work performed
under contract by more than 93,000 contractor employees. DOE's record
of inadequate management and oversight of its contractors resulted in
our initial high-risk designation for contract management and, as noted
in our January 2009 high-risk report, [Footnote 1] DOE's contract
management, including both contract administration and project
management, continues to be at high risk for fraud, waste, abuse, and
mismanagement.
The two largest program offices within DOE--the National Nuclear
Security Administration (NNSA) and the Office of Environmental
Management (EM)--continue to experience significant problems completing
projects on time and on budget. Together, these two offices account for
about $14 billion annually--roughly 60 percent of DOE's annual budget.
Strong congressional oversight will continue to be important as NNSA
embarks on a major initiative costing tens of billions of dollars to
modernize the nation's aging nuclear weapons infrastructure and EM
continues to spend billions of dollars to build facilities to treat and
dispose of millions of gallons of radioactive waste. Further scrutiny
is warranted because EM is the recipient of approximately $6 billion in
additional funding under the recently enacted American Recovery and
Reinvestment Act.
In the nearly 3 years since we testified before this Subcommittee on
the Hanford Site's waste treatment plant, one of DOE's most technically
complex and largest construction projects, we have issued 12 reports--
9 at the request of this Subcommittee--examining DOE's largest
construction and cleanup projects.[Footnote 2] These projects are
projected to cost, in total, roughly $127 billion and take decades to
complete. Nearly all of these projects are managed by NNSA or EM. These
reports detail a litany of contract and management problems that have
led to, in many cases, massive cost increases and significant schedule
delays.
My testimony today discusses (1) our work over the past 3 years on NNSA
and EM contract and project management of large projects, (2) the
preliminary results of our ongoing review of the cost and schedule
performance and the status of licensing on a major NNSA construction
project--the nearly $5 billion Mixed Oxide Fuel Fabrication Facility
(MFFF) at the Savannah River Site in South Carolina, and (3) actions
needed by NNSA and EM to improve contract and project management.
Today's statement is based on published GAO products and ongoing work
for this Subcommittee. In conducting our work on the MFFF project, we
met with NNSA and contractor officials, visited the MFFF construction
site in South Carolina, reviewed relevant project documents such as
project execution plans and performance reports, examined the
reliability of the project's earned value management data, and examined
the reliability of the project's schedule. We conducted the performance
audit work that supports this statement in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence
to produce a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our statements today.
GAO's Recent Work Shows That NNSA's and EM's Projects Continue to Be at
High Risk for Fraud, Waste, Abuse, and Mismanagement:
Over the past 3 years, we have reported on significant problems with
NNSA's and EM's ability to manage major projects within cost and
schedule targets. Two of these reports examined the performance of
DOE's largest construction projects--nearly all of these projects are
managed by NNSA or EM--and EM's largest nuclear waste cleanup projects.
The estimated cost of completing these construction projects is about
$27 billion, and the estimated cost of completing these cleanup
projects is about $100 billion. In summary, these reports documented
that the cost increases and schedule delays that have occurred for most
of these projects have been the result of inconsistent application of
project management tools and techniques on the part of both DOE and its
contractors. These reports identified issues, including inadequate
systems for measuring contractor performance, approval of construction
activities before final designs were sufficiently complete, ineffective
project reviews, and ineffective development and integration of the
technologies used in these projects.
Regarding DOE's largest construction projects, we reported in March
2007 that 8 of the 10 major NNSA or EM construction projects we
reviewed had exceeded the initial cost estimates for completing these
projects--in total, DOE added nearly $14 billion to these initial
estimates.[Footnote 3] We also reported that 9 of the 10 projects were
behind schedule--in total, DOE added more than 45 years to the initial
schedule estimates. These projects included:
* the MFFF, the Pit Disassembly and Conversion Facility, the Tritium
Extraction Facility, and the Salt Waste Processing Facility at the
Savannah River Site;
* the Waste Treatment and Immobilization Plant at the Hanford Site;
* the Highly Enriched Uranium Materials Facility at the Y-12 National
Security Complex in Tennessee;
* the National Ignition Facility at the Lawrence Livermore National
Laboratory in California; and:
* the Depleted Uranium Hexafluoride 6 Conversion Facilities at DOE
sites in Kentucky and Ohio.
Cost increases ranged from $122 million for the Tritium Extraction
Facility to $7.9 billion for the Waste Treatment and Immobilization
Plant, and schedule delays ranged from almost 2 years for the Highly
Enriched Uranium Materials Facility to over 11 years for the Pit
Disassembly and Conversion Facility, with seven projects having
schedule delays of 2 years or more. Although external factors, such as
additional security and safety requirements, contributed to cost growth
and delays, we found that cost growth and schedule slippage in many of
the DOE projects we reviewed occurred principally because of
ineffective project management oversight on the part of DOE and poor
project management on the part of DOE's contractors. We also found
that, while DOE requires final project designs to be sufficiently
complete before beginning construction, it has not systematically
ensured that the critical technologies reflected in these designs have
been demonstrated to work as intended prior to the start of
construction.
For example, we found that NNSA's National Ignition Facility project
had over $1 billion in cost overruns and years of schedule delays, in
large part because of poor management of the development and
integration of the technologies used in the project's designs. The
requirements for the National Ignition Facility--the use of 192 high-
power laser beams focused on a single target in a "clean room"
environment--had not been attempted before on such a large scale.
According to the NNSA project director, early incorrect assumptions
about the original facility design and the amount of work necessary to
integrate the technologies and assemble the technical components
contributed to about half of the project's cost increases and schedule
delays.
In addition, we found that EM's Salt Waste Processing Facility project
at the Savannah River Site had cost overruns and project delays, in
part due to inadequate communication between officials on site and at
DOE headquarters. This project, which is designed to treat radioactive
waste from activities at the Savannah River Site, was originally
scheduled to begin operating in 2009 but has been delayed twice and is
not now projected to begin operations until as late as November 2013.
We found that the Defense Nuclear Facilities Safety Board had expressed
concerns in June 2004, 5 months after the preliminary design was
started, that the facility design might not ensure nuclear wastes would
be adequately contained in the event of earthquakes. However, project
managers did not address these concerns for 17 months and continued to
move forward with the existing project design. According to the DOE
project director, better and more timely discussions between site
officials and headquarters to decide on the actions needed to
adequately address these safety and security requirements might have
hastened resolution of the problem, and up to 1 year of design rework
might have been avoided. Project delays added $180 million to the total
project cost. EM officials now require a more rigorous safety analysis
earlier in the decision-making process.
In regard to EM's largest cleanup projects, in September 2008, we
reported that 9 of the 10 major EM cleanup projects had experienced
cost increases and schedule delays--in total DOE estimated that it
needed an additional $25 billion to $42 billion to complete these
cleanup projects over the initial cost estimates and an additional 68
to 111 more years than initially estimated.[Footnote 4] These projects
included:
* the solid waste stabilization and disposition project at the Idaho
National Laboratory in Idaho;
* the nuclear facility decontamination and decommissioning project at
the Oak Ridge Reservation in Tennessee;
* the nuclear material stabilization and disposition project and the
radioactive liquid tank stabilization and disposition project at the
Savannah River Site in South Carolina;
* the soil and water remediation project at the Los Alamos National
Laboratory in New Mexico; and:
* the nuclear material stabilization and disposition project, the solid
waste stabilization and disposition project, the soil and water
remediation project, and the radioactive liquid tank stabilization and
disposition project at the Hanford Site in Washington.
Cost increases ranged from $139 million for the Los Alamos soil and
water remediation project to more than $9 billion for the Hanford
radioactive liquid tank stabilization and disposition project. Schedule
delays ranged from 2 years for the Hanford nuclear material
stabilization and disposition project to 15 years for two additional
projects at the Hanford Site--the solid waste stabilization and
disposition project and the soil and water remediation project. We
found that these changes arose primarily because the initial baseline
estimates for these projects made schedule assumptions that were not
linked to technical or budget realities. Also, most of the 10 projects
had cost increases and schedule delays because the previous baselines
(1) had not fully foreseen the type and extent of cleanup needed, (2)
assumed that construction projects needed to carry out the cleanup work
would be completed on time, or (3) had not expected substantial
additional work scope. We also found that DOE had not effectively used
management tools--including independent project baseline reviews,
performance information systems, guidance, and performance goals--to
help oversee major cleanup projects' scope of work, costs, and
schedules.
For example, the initial schedule estimate for a solid waste
disposition project at DOE's Idaho National Laboratory was influenced
by an EM-wide effort to accelerate the office's cleanup work by
creating new, earlier completion dates for key cleanup projects and for
closing entire sites to reduce the public health and environmental
risks posed by the waste at these sites. To meet its 2012 accelerated
completion date, the laboratory assumed its waste treatment plant could
process waste at a rate that was more than 50 percent higher than the
rate demonstrated at the time EM established the baseline. Because the
plant had only recently begun operating, project staff lacked
confidence that they could meet the processing rate. Moreover, the
independent team reviewing the baseline reported that the rate was
optimistically high. Nevertheless, EM proceeded with the initial
baseline and attempted to meet the optimistic rate by providing the
contractor with performance incentives, which proved ineffective. When
the waste treatment plant did not meet that processing rate, EM revised
its baseline, deferring 4 years of cleanup work, which added about $450
million to the project.
In addition, we found that cost increases and schedule delays occurred
because EM project officials did not accurately anticipate site or
safety conditions. For example, an EM project at the Oak Ridge
Reservation in Tennessee to decontaminate and decommission
approximately 500 facilities and remediate 160 sites experienced cost
increases of $1.2 billion and a 9-year delay in its completion date
from 2008 to 2017. These occurred because project officials did not
accurately anticipate the site conditions or the types of work
activities necessary to safely conduct the work, despite multiple
estimates generated by the contractor, DOE, and the Army Corps of
Engineers. In this case, a 1940s-era building was far more contaminated
and deteriorated than first estimated. As a result, DOE changed its
cleanup plan and implemented a more extensive--and therefore more
expensive--approach to tearing down the building. In addition, after a
worker fell through a weakened floor, the contractor had to reinforce
the building's structure so that contaminated equipment could be
removed safely.
In addition to the findings in these two reports, we have issued other
reports over the past 3 years that also found similar project
management problems with NNSA and EM. We issued eight other reports
that found poor scheduling practices, incomplete cost estimates, poor
communication between DOE headquarters and its field locations, and
other issues related to ineffective project management.
* In January 2007, we reported that management problems within NNSA
persisted, in part, because NNSA and DOE had not fully agreed on how
NNSA should function within the department as a separately organized
agency.[Footnote 5] This lack of agreement resulted in organizational
conflicts that have inhibited effective operations. We also identified
the following areas where additional management improvements were
needed: (1) regarding project management, we found that NNSA had not
developed a project management policy, implemented a plan for improving
its project management efforts, or fully shared project management
lessons learned between its sites; (2) regarding program management, we
found that NNSA had not identified all of its program managers or
trained them to a certified level of competency; and (3) regarding
financial management, we found that NNSA had not established an
independent analysis unit to review program budget proposals, confirm
cost estimates, and analyze budget alternatives.
* In May 2007, we reported that despite a number of efforts by DOE to
improve its approach to project management, the department's overall
performance on projects had not substantially improved.[Footnote 6] DOE
had set a performance goal of having 90 percent of its ongoing projects
being managed within a 10 percent variance of cost and schedule
baseline targets. However, we found that since October 2002, when DOE
began reporting monthly project performance data, the department had
achieved its performance goals for construction projects only about one-
third of the time. Also, we found that since February 2004, EM's
cleanup projects met cost and schedule performance goals only about one-
fifth of the time.
* In June 2007, we reported that DOE's preliminary estimate of the cost
to address the five waste sites where transuranic wastes are buried was
about $1.6 billion in 2006 dollars, but the estimate was likely to
increase for several reasons.[Footnote 7] For example, DOE's estimate
reflected the costs of leaving most waste under earthen barriers--
typically the least expensive approach. If DOE was required to retrieve
substantial portions of these wastes, costs would increase
dramatically. In addition, DOE's estimate excluded unknown costs, such
as the cost of disposing of wastes off-site, if necessary. For example,
DOE's lifecycle cost estimate to remove transuranic wastes buried near
the Columbia River at the Hanford Site could triple once options and
costs for disposal are fully evaluated.
* Also, in June 2007, we reported that EM did not follow key
departmental project management requirements for its Bulk Vitrification
Demonstration Project, which aimed to demonstrate an alternative
technology to treat low-activity radioactive waste at the Hanford Site.
[Footnote 8] Specifically, early in the demonstration, EM did not
conduct key internal and external reviews that would have evaluated the
project's design, procurement, and construction management approaches
to identify potential problems and address them before starting
construction. In addition, EM did not fully develop or update key
project planning documents, such as a project execution plan, an
acquisition plan, and a validated estimate of project costs. Without
these management tools, EM initially overlooked a number of technical
and safety problems facing the demonstration project, such as
uncertainties about the quality of the glass formed using the bulk
vitrification technology and inadequate systems to shield and confine
radioactive material from workers and the environment. These problems
contributed to an increase in estimated project costs from $62 million
to $230 million, a 6-year delay, and an increase to the estimated life-
cycle cost of a future full-scale bulk vitrification facility from
about $1.3 billion to $3 billion. The project was subsequently
suspended, after an investment of $100 million and several years of
effort.
* In July 2007, we reported that EM had performed little or no review
of contractor invoices or supporting documents for millions of dollars
in charges billed to DOE each month by the contractor for the
construction of the Waste Treatment Plant at the Hanford Site.[Footnote
9] Given the multibillion-dollar cost and schedule overruns already
experienced with the project, the need for close, ongoing review of
invoiced transactions and support is particularly compelling. We found
that the contractor's invoices provided little detail as to the items
purchased, contrary to federal acquisition regulations and contract
requirements. EM officials chose to rely primarily on another agency
(the Department of Defense's Defense Contract Audit Agency) to review
and approve the contractor's corporate-wide financial systems, which EM
officials believed allowed them to rely on the contractor's systems
with little or no DOE oversight. In addition, EM relied primarily on
its contractor to review and validate subcontractor charges without
having a process in place to assess whether its contractor was properly
carrying out its subcontractor oversight responsibility. EM's heavy
reliance on others, with little oversight of its own, exposed the
hundreds of millions of dollars it spent annually on the project to an
unnecessarily high risk of improper payments. We also concluded that
the property control weaknesses we identified, coupled with the lack of
DOE oversight, created an environment in which property could be lost
or stolen.
* In May 2008, we reported that NNSA's project to manufacture pits--the
key component in a nuclear warhead that starts the nuclear chain
reaction--at the Los Alamos National Laboratory in New Mexico did not
include all associated costs in its estimates and did not establish a
clear schedule for manufacturing pits.[Footnote 10] NNSA established a
goal in 2002 to create the capability to manufacture 10 pits per year
starting in 2007 and to deliver a single war reserve pit--a pit that
can be used in the U.S. nuclear weapons stockpile--for the W88 nuclear
warhead in 2007. NNSA estimated that this effort would cost about $1.55
billion between fiscal years 2001 and 2007. NNSA subsequently reported
that it was implementing the project under budget by spending $1.29
billion on the pit manufacturing effort between fiscal years 2001 and
2007. However, NNSA's cost estimate did not include costs for a variety
of activities that directly and indirectly supported the pit
manufacturing project. These support activities, which included
scientific experiments as well as facility operations and maintenance,
totaled over $1 billion. In addition, we found that NNSA did not
establish a clear, consistent schedule of the number of war reserve
pits it planned to produce. Specifically, although NNSA produced eight
W88 war reserve pits in 2007--exceeding the goal established in 2002 of
one W88 war reserve pit in 2007--other NNSA documents (including budget
requests to the Congress) called for a goal of delivering 10 W88 war
reserve pits per year starting in 2007.
* In June 2008, we reported that EM had made limited progress in its
cleanup efforts at the Hanford Site, specifically in transferring waste
from its 149 single-shell tanks to its larger and more robust double-
shell tanks.[Footnote 11] We also reported that DOE's cost estimate for
retrieving tank waste was significantly understated and that DOE's 2003
estimate of $4.3 billion increased to $7.6 billion. Under the current
Tri-Party Agreement--an agreement between DOE, the state of Washington,
and the Environmental Protection Agency laying out milestones for the
cleanup efforts at Hanford--DOE agreed to empty all 149 single-shell
tanks at the site by September 2018 and close them by 2024. To date,
only seven tanks have been emptied, and at its present rate of
progress--currently only one tank is emptied per year--DOE will not
achieve the milestones it committed to in the Tri-Party Agreement. DOE
has since acknowledged that (1) the start of waste treatment operations
will be delayed by at least 8 years (from 2011 to 2019) and (2) the
completion of waste treatment operations may be delayed by at least 29
years (from 2018 to 2047).
* In July 2008, we reported that EM's cost estimate for processing 23
metric tons of highly enriched uranium and plutonium at a facility at
the Savannah River Site known as H-Canyon did not include all
associated costs.[Footnote 12] Although EM estimated that it would cost
approximately $4.3 billion to $4.6 billion to process these materials
through 2019, this estimate did not include several costs EM expects
will be associated with canyon operations. According to EM and NNSA
officials, more highly enriched uranium and plutonium may be identified
as suitable for processing using H-Canyon, which could delay its
shutdown and increase its operational costs. In addition, the estimate
did not include the cost of storing and treating the waste generated by
H-Canyon operations through 2019--approximately $253 million, according
to EM. We also reported that completion of some safety and
environmental analyses have been delayed by as much as 2 years, and any
further delays could affect canyon operations.
Preliminary Results From Ongoing GAO Work on NNSA's Mixed Oxide Fuel
Fabrication Facility Indicate Continuing Project Management Concerns:
We are currently reviewing the cost and schedule performance and the
status of licensing the MFFF construction project at the Savannah River
Site, a nearly $5 billion facility that is designed to convert 34
metric tons of surplus weapons-grade plutonium into fuel for use in
commercial nuclear reactors.[Footnote 13] In accordance with DOE's
project management requirements, NNSA is using an earned value
management system to measure and report the progress of the MFFF
construction project. One critical component of an effective earned
value management system is the development of a reliable schedule. For
example, a schedule should specify when the project's set of work
activities will occur, how long they will take, and how they relate to
one another. The schedule not only provides a roadmap for the
systematic execution of a program but also provides the means by which
to gauge progress, identify and address potential problems, and promote
accountability.
GAO has identified nine practices associated with effective schedule
estimating: (1) capturing key activities, (2) sequencing key
activities, (3) establishing the duration of key activities, (4)
assigning resources to key activities, (5) integrating key activities
horizontally and vertically, (6) establishing the critical path for key
activities, (7) identifying "float time" between key activities, (8)
performing a schedule risk analysis, and (9) distributing reserves to
high-risk activities.[Footnote 14] Most of these practices are also
identified by DOE in a recent guidance document on establishing
performance baselines.[Footnote 15]
Although the MFFF project's schedule was developed using many of these
practices, the schedule, in addition to other problems, does not employ
a key practice that is fundamental to having a sufficiently reliable
schedule--specifically, MFFF project staff have not conducted a risk
analysis on their current schedule using statistical techniques.
Consequently, NNSA cannot adequately state its level of confidence in
meeting the MFFF project's completion date of October 2016, and NNSA's
schedule for the project therefore may not be reliable. In addition, we
found that the schedule does not fully employ other key practices that
are also fundamental to having a sufficiently reliable schedule. For
example, another key scheduling practice--the proper sequencing of key
activities--requires that project officials logically schedule key
activities in the order that they are to be carried out to establish a
basis for guiding work and measuring progress. However, based on the
preliminary results of our analysis, the MFFF project only partially
satisfied this practice. Specifically, we found that almost 1,500 of
the over 24,000 activities listed in the MFFF project's schedule were
not sequenced in a logical manner. As a result, we have reduced
confidence in the ability of the MFFF project's schedule to accurately
reflect how the MFFF project will be executed (see app. II for the
preliminary results of our analysis of the MFFF project's schedule).
As recently as December 2008, the MFFF project's earned value
management system indicated that the project was meeting its cost and
schedule goals. However, correcting weaknesses in the MFFF project's
schedule is important because the project is currently spending
approximately $25 million a month and plans to spend an additional $3.6
billion before the project is completed in 2016. In our view,
correction of these schedule reliability concerns now could avert
potentially expensive schedule overruns in the future and will enable
NNSA to more effectively measure the performance status of the MFFF
project. NNSA and contractor officials told us that they recognize some
of the problems we identified with the MFFF project's schedule and are
planning to make improvements. Specifically, project officials told us
that they plan to conduct a schedule risk analysis during the summer of
2009. Our work on this project is continuing, and we intend to work
with NNSA to resolve these issues to the extent possible. In the
meantime, we would urge caution in using the results from the MFFF
project's earned value management reports until these issues have been
addressed.
In addition to our work on the MFFF project, we are also currently
conducting work on DOE cost estimating for this Subcommittee.
Specifically, we are examining cost estimating practices within NNSA,
EM, and DOE's Office of Science by selecting a sample of large projects
and comparing their cost estimates with DOE policy and GAO-identified
best practices. We also plan to identify any impediments that DOE may
face in developing reliable, credible, and comprehensive cost
assessments. Finally, we are evaluating the cleanup strategy DOE is
using to address the 56 million gallons of radioactive and hazardous
waste at the Hanford Site in Washington State. Specifically, we will be
evaluating the legal, technical, and risk issues affecting this multi-
billion, decades-long project. We plan to update the Subcommittee on
the status of our work later this spring.
Action Underway and Needed to Reduce Project Vulnerability to Fraud,
Waste, Abuse, and Mismanagement:
In the nearly 3 years since we last testified before this Subcommittee,
the reports we have issued on projects across NNSA and EM have
contained nearly 60 recommendations. These recommendations collectively
call for DOE to ensure that project management requirements are
consistently followed, to improve oversight of contractors, and to
strengthen accountability for performance. Although DOE's responses to
these recommendations have been largely positive, and some corrective
actions have been taken, most of the recommendations are still open,
awaiting action by the department.
DOE has also taken steps to better understand weaknesses underlying its
contract and project management.[Footnote 16] First, with input from
headquarters and field officials with contract and project management
expertise, it completed a root-cause analysis. In this analysis, DOE
found a number of problems, including:
* Risks associated with projects are not objectively identified,
assessed, communicated, or managed through all phases of planning and
execution.
* Ineffective project oversight has resulted in failure to identify
project performance issues in a timely manner.
* DOE is not effectively executing its ownership role on some large
projects with respect to overseeing and managing contracts and
contractors.
On the basis of its root-cause analysis, DOE also completed a
comprehensive corrective action plan to address these weaknesses, with
both near-term and long-term goals and objectives.
Because of these actions, and other improvements made over the past
decade to establish a more structured and disciplined approach to
contract and project management, we believe that DOE as a whole has
substantially met three of the five criteria necessary for removal from
our high-risk list. Specifically, DOE has (1) demonstrated strong
commitment and leadership; (2) demonstrated progress in implementing
corrective measures; and (3) developed a corrective action plan that
identifies root causes, effective solutions, and a near-term plan for
implementing the solutions.
Two criteria remain for removal from our high-risk list: having the
capacity (people and resources) to resolve the problems and monitoring
and independently validating the effectiveness and sustainability of
corrective measures. Regarding capacity, DOE's April 2008 root-cause
analysis report recognized as one of its top 10 issues a lack of an
adequate number of federal contracting and project personnel with the
appropriate skills (such as cost estimating, risk management, and
technical expertise) to plan, direct, and oversee project execution.
Monitoring and validating the effectiveness and sustainability of
corrective measures will take time to demonstrate. Our recent work has
shown that the Office of Science--DOE's third-largest program office--
has demonstrated strong performance in meeting cost and schedule
targets.[Footnote 17] Specifically, we found that, of 42 Office of
Science projects completed or under way from fiscal years 2003 through
2007, more than two-thirds were completed or being carried out within
original cost and schedule targets. The office's ability to generally
achieve projects' original cost and schedule targets is due in part to
factors often considered fundamental to effective project management:
leadership commitment to meeting cost and schedule targets; appropriate
management and technical expertise; and disciplined, rigorous
implementation of project management policies. The Office of Science's
frequent independent reviews, in particular, were cited by DOE
officials as a key reason for its project management performance. Until
NNSA and EM can demonstrate these principles and consistently complete
projects on time and within budget, it will be difficult to demonstrate
that any of the corrective actions taken have achieved their desired
effect--improved cost and schedule performance. Until that time, both
NNSA and EM will remain vulnerable to fraud, waste, abuse, and
mismanagement and therefore will remain on our high-risk list.
Agency Comments and Our Evaluation:
We provided a draft of our preliminary findings with respect to the
MFFF project's schedule to NNSA for its review and comment. Overall,
NNSA and project officials agreed with many of our specific findings,
including the fact that project officials have not conducted a risk
analysis of the current project schedule using statistical techniques.
However, NNSA officials did not agree with our conclusion that, as a
result of some of the shortcomings we identified, the project's
schedule may not be reliable. In addition, project officials told us
that they planned to conduct a schedule risk analysis on the current
schedule during the summer of 2009.
Mr. Chairman, this concludes my prepared statement. I would be happy to
respond to any questions that you or Members of the Subcommittee may
have at this time.
GAO Contacts and Staff Acknowledgments:
For further information on this testimony, please contact me at (202)
512-3841 or aloisee@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this statement. Ryan T. Coles, Daniel Feehan, and Janet Frisch,
Assistant Directors; Alison Bawden; Carole Blackwell; James Espinoza;
Stephanie Gaines; Eugene Gray; Jason Holliday; Chris Pacheco; Tom
Perry; Leslie Pollock; Steve Rossman; Peter Ruedel; and Carol
Herrnstadt Shulman made key contributions to this testimony.
[End of section]
Appendix I: Related GAO Products:
High Risk Series: An Update. [hyperlink,
http://www.gao.gov/products/GAO-09-271]. Washington, D.C.: January 22,
2009.
Nuclear Waste: Action Needed to Improve Accountability and Management
of DOE's Major Cleanup Projects. [hyperlink,
http://www.gao.gov/products/GAO-08-1081]. Washington, D.C.: September
26, 2008.
Nuclear Material: DOE Needs to Take Action to Reduce Risks Before
Processing Additional Nuclear Material at the Savannah River Site's H-
Canyon. [hyperlink, http://www.gao.gov/products/GAO-08-840].
Washington, D.C.: July 25, 2008.
Nuclear Waste: DOE Lacks Critical Information Needed to Assess Its Tank
Management Strategy at Hanford. [hyperlink,
http://www.gao.gov/products/GAO-08-793]. Washington, D.C.: June 30,
2008.
Department of Energy: Office of Science Has Kept Majority of Projects
within Budget and on Schedule, but Funding and Other Challenges May
Grow. [hyperlink, http://www.gao.gov/products/GAO-08-641]. Washington,
D.C.: May 30, 2008.
Nuclear Weapons: NNSA Needs to Establish a Cost and Schedule Baseline
for Manufacturing a Critical Nuclear Weapons Component. [hyperlink,
http://www.gao.gov/products/GAO-08-593]. Washington, D.C.: May 23,
2008.
Hanford Waste Treatment Plant: Department of Energy Needs to Strengthen
Controls over Contractor Payments and Project Assets. [hyperlink,
http://www.gao.gov/products/GAO-07-888]. Washington, D.C.: July 20,
2007.
Nuclear Waste: DOE Should Reassess Whether the Bulk Vitrification
Demonstration Project at Its Hanford Site Is Still Needed to Treat
Radioactive Waste. [hyperlink, http://www.gao.gov/products/GAO-07-762].
Washington, D.C.: June 12, 2007.
Nuclear Waste: Plans for Addressing Most Buried Transuranic Wastes Are
Not Final, and Preliminary Cost Estimates Will Likely Increase.
[hyperlink, http://www.gao.gov/products/GAO-07-761]. Washington, D.C.:
June 22, 2007.
Department of Energy: Consistent Application of Requirements Needed to
Improve Project Management. [hyperlink,
http://www.gao.gov/products/GAO-07-518]. Washington, D.C.: May 11,
2007.
Department of Energy: Major Construction Projects Need a Consistent
Approach for Assessing Technology Readiness to Help Avoid Cost
Increases and Delays. [hyperlink,
http://www.gao.gov/products/GAO-07-336]. Washington, D.C.: March 27,
2007.
National Nuclear Security Administration: Additional Actions Needed to
Improve Management of the Nation's Nuclear Programs. [hyperlink,
http://www.gao.gov/products/GAO-07-36]. Washington, D.C.: January 19,
2007.
[End of section]
Appendix II: GAO's Preliminary Analysis of the Mixed Oxide Fuel
Fabrication Facility Project's Schedule:
Table 1: Extent to Which the MFFF Project's Schedule Used Key
Practices:
Practice: Capturing key activities;
Explanation: The schedule should reflect all key activities as defined
in the program's work breakdown structure, including activities to be
performed by both the government and its contractors;
Satisfied?: Yes;
GAO analysis: The project's schedule reflects both government and
contractor activities, such as the building and testing of software
components, as well as key milestones for measuring progress.
Practice: Sequencing key activities;
Explanation: The schedule should be planned so that it can meet
critical program dates. To meet this objective, key activities need to
be logically sequenced in the order that they are to be carried out. In
particular, activities that must finish prior to the start of other
activities (predecessor activities), as well as activities that cannot
begin until other activities are completed (successor activities),
should be identified. This helps ensure that interdependencies among
activities that collectively lead to the accomplishment of events or
milestones can be established and used as a basis for guiding work and
measuring progress;
Satisfied?: Partially;
GAO analysis: Of 24,289 total activities, 1,474 are not logically
sequenced--that is, the schedule does not identify interdependencies
among work activities that form the basis for guiding work and
measuring progress.
Practice: Establishing the duration of key activities;
Explanation: The schedule should realistically reflect how long each
activity will take to execute. In determining the duration of each
activity, the same rationale, historical data, and assumptions used for
cost estimating should be used. Durations should be as short as
possible and have specific start and end dates. The schedule should be
continually monitored to determine when forecasted completion dates
differ from the planned dates; this information can be used to
determine whether schedule variances will affect downstream work;
Satisfied?: Partially;
GAO analysis: 1,064 of the 24,289 total activities have durations of
over 200 days. Durations should be as short as possible and have
specific start and end dates to ensure the objective measurement of
progress.
Practice: Assigning resources to key activities;
Explanation: The schedule should reflect what resources (e.g., labor,
material, and overhead) are needed to do the work, whether all required
resources will be available when needed, and whether any funding or
time constraints exist;
Satisfied?: Yes;
GAO analysis: The schedule reflects $3.2 billion in resource costs.
Practice: Integrating key activities horizontally and vertically;
Explanation: The schedule should be horizontally integrated, meaning
that it should link the products and outcomes associated with other
sequenced activities. These links are commonly referred to as
"handoffs" and serve to verify that activities are arranged in the
right order to achieve aggregated products or outcomes. The schedule
should also be vertically integrated, meaning that traceability exists
among varying levels of activities and supporting tasks and subtasks.
Such mapping or alignment among levels enables different groups to work
to the same master schedule;
Satisfied?: Yes;
GAO analysis: The program has provided evidence that the schedule is
sufficiently integrated.
Practice: Establishing the critical path for key activities;
Explanation: Using scheduling software, the critical path--the longest
duration path through the sequenced list of key activities--should be
identified. The establishment of a program's critical path is necessary
for examining the effects of any activity slipping along this path.
Potential problems that might occur along or near the critical path
should also be identified and reflected in the scheduling of the time
for high-risk activities;
Satisfied?: Partially;
GAO analysis: A critical path has been established but the program
first needs to satisfy the other scheduling best practices listed above
before the critical path can be considered reliable.
Practice: Identifying the "float time" between key activities;
Explanation: The schedule should identify float time--the time that a
predecessor activity can slip before the delay affects successor
activities--so that schedule flexibility can be determined. As a
general rule, activities along the critical path typically have the
least amount of float time. Total float time is the amount of time
flexibility an activity has that will not delay the project's
completion (if everything else goes according to plan);
Satisfied?: Partially;
GAO analysis: The schedule contains 885 activities with extremely low
float values (1 day or less).
Practice: Performing a schedule risk analysis;
Explanation: A schedule risk analysis should be performed using
statistical techniques to predict the level of confidence in meeting a
program's completion date. This analysis focuses not only on critical
path activities but also on activities near the critical path, since
they can affect program status;
Satisfied?: No;
GAO analysis: The MFFF project has not performed a schedule risk
analysis using statistical techniques. Project officials told us that
they plan to address this issue during the summer of 2009.
Practice: Distributing reserves to high-risk activities;
Explanation: The baseline schedule should include a buffer or a reserve
of extra time. Schedule reserve for contingencies should be calculated
using a schedule risk analysis. As a general rule, the reserve should
be applied to high-risk activities, which are typically found along the
critical path;
Satisfied?: Partially;
GAO analysis: Although project officials have not identified
appropriate schedule reserves based on a schedule risk analysis, they
have identified contingency funding using a programmatic risk program
to identify high-risk activities.
Source: GAO analysis of the MFFF project schedule, February 2009.
[End of table]
[End of section]
Footnotes:
[1] GAO, High Risk Series: An Update, [hyperlink,
http://www.gao.gov/products/GAO-09-271] (Washington, D.C.: Jan. 22,
2009).
[2] A listing of related GAO products appears in appendix I.
[3] GAO, Department of Energy: Major Construction Projects Need a
Consistent Approach for Assessing Technology Readiness to Help Avoid
Cost Increases and Delays, [hyperlink,
http://www.gao.gov/products/GAO-07-336] (Washington, D.C.: March 27,
2007).
[4] GAO, Nuclear Waste: Action Needed to Improve Accountability and
Management of DOE's Major Cleanup Projects, [hyperlink,
http://www.gao.gov/products/GAO-08-1081] (Washington, D.C.: Sept. 26,
2008).
[5] GAO, National Nuclear Security Administration: Additional Actions
Needed to Improve Management of the Nation's Nuclear Programs,
[hyperlink, http://www.gao.gov/products/GAO-07-36] (Washington, D.C.:
Jan. 19, 2007).
[6] GAO, Department of Energy: Consistent Application of Requirements
Needed to Improve Project Management, [hyperlink,
http://www.gao.gov/products/GAO-07-518] (Washington, D.C.: May 11,
2007).
[7] GAO, Nuclear Waste: Plans for Addressing Most Buried Transuranic
Wastes Are Not Final and Preliminary Cost Estimates Will Likely
Increase, [hyperlink, http://www.gao.gov/products/GAO-07-761]
(Washington, D.C.: June 22, 2007).
[8] GAO, Nuclear Waste: DOE Should Reassess Whether the Bulk
Vitrification Demonstration Project at Its Hanford Site Is Still Needed
to Treat Radioactive Waste, [hyperlink,
http://www.gao.gov/products/GAO-07-762] (Washington, D.C.: June 12,
2007).
[9] GAO, Hanford Waste Treatment Plant: Department of Energy Needs to
Strengthen Controls over Contractor Payments and Project Assets,
[hyperlink, http://www.gao.gov/products/GAO-07-888] (Washington, D.C.:
July 20, 2007).
[10] GAO, Nuclear Weapons: NNSA Needs to Establish a Cost and Schedule
Baseline for Manufacturing a Critical Nuclear Weapon Component,
[hyperlink, http://www.gao.gov/products/GAO-08-593] (Washington, D.C.:
May 23, 2008).
[11] GAO, Nuclear Waste: DOE Lacks Critical Information Needed to
Assess Its Tank Management Strategy at Hanford, [hyperlink,
http://www.gao.gov/products/GAO-08-793] (Washington, D.C.: June 30,
2008).
[12] GAO, Nuclear Material: DOE Needs to Take Action to Reduce Risks
Before Processing Additional Nuclear Material at the Savannah River
Site's H-Canyon, [hyperlink, http://www.gao.gov/products/GAO-08-840]
(Washington, D.C.: July 25, 2008).
[13] Our March 2007 review of DOE's major construction projects found
that the MFFF had incurred more than a $3.2 billion cost increase over
the initial cost estimate and a schedule delay in excess of 11 years
more than initially estimated.
[14] GAO, Cost Assessment Guide: Best Practices for Estimating and
Managing Program Costs - Exposure Draft, [hyperlink,
http://www.gao.gov/products/GAO-07-1134SP] (Washington, D.C.: July 2,
2007).
[15] U.S. Department of Energy, Performance Baseline Guide, G 413.3-5
(Washington, D.C.: September 12, 2008).
[16] Department of Energy, Root Cause Analysis: Contract and Project
Management (Washington, D.C., April 2008).
[17] GAO, Department of Energy: Office of Science Has Kept Majority of
Projects within Budget and on Schedule, but Funding and Other
Challenges May Grow, [hyperlink,
http://www.gao.gov/products/GAO-08-641] (Washington, D.C.: May 30,
2008).
[End of section]
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